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Everything posted by Van

  1. Assumptions vs Reality.. this is worth watching
  2. eh? Different oil producers have different cost to bring their oil to the market. We know the Saudis are probably the cheapest, where it can be extracted as cheaply as $10/pb (I personally doubt it is anywhere near this low), while most US producers are losing money at current sub-$40 level. Brent North Sea is quite expensive, somewhere around mid-$40s. But I don't think anyone has a cost anywhere near as high as 100pb. Sorry, no. But be careful because to extract oil requires oil, so if the price falls, input costs fall anyway. The death of oil has been greatly exaggerated. I'm sure that we'll be revisiting this thread in 2 years' time and wonder how we failed to buy MORE oil when it was such a bargain.
  3. Interesting way of valuing stocks which I had not considered before - the Buffett Indicator, ie Wilshire 5000 / US GDP Current ratio is only slightly below the 2000 peak.
  4. I am betting on volatility via long TVIX position for a short term trade: http://www.zerohedge.com/news/2016-04-04/goldman-questions-rally-fears-looming-event-risk-amid-record-vix-longs
  5. Commodities - the buy for the next decade: http://independenttrader.org/commodities-assets-for-the-next-decade.html Look where sentiment is now: .. and how this correspondents with bear market lows:
  6. Van

    UK House prices: News & Views

    Have rising house prices pushed monthly repayments above the cost of renting? Do YOU fear you can't ever get on the property ladder? Fear Not! We have the solution. Throw away the 25 year mortgage. Now introducing the 40 year mortgage. Keeping home affordable for 40 years or more. Because you KNOW prices only ever go up. Buy now before it's too late! http://www.theguardian.com/money/2015/oct/09/first-time-buyers-stretching-house-prices-mortgage-repayments-property-ladder /and Jesus wept.
  7. Maybe, but quite likely not based on historical precedence of my model, which has shown that each time the price has crossed the first boundary, it has also gone on to spike above the 2nd boundary, which it has not done so yet. IMO, if and when it does, that will be the time to go "all in" on silver.
  8. Van


    Interesting take on the current implication of the GSR: http://www.bloomberg.com/news/articles/2016-03-21/gold-silver-ratio-says-it-s-time-to-buy-one-sell-other-chart
  9. Sure, it doesn't matter if the GSR takes a breather before getting there, so long it gets there. The swap boundary is a moving target that is currently trending up,and so the GSR might have to reach a higher number to reach the swap number, depending on how prices move over the next few months. We got quite close in Nov-2015 when the GSR was 82.5 against a swap trigger level of 84.95. Just looking historically at the model, the chances are very good that it will reach this level in the next year or so - whenever the price has moved beyond the "buy only silver" boundary it has then gone on the reach the "swap" boundary within a few years. Correspondingly, I would not be surprised to see a spike in the GSR any month now that would push it to that level. This might correspond with a final legdown lower in precious metals, where silver traditionally gets whacked down more than gold.
  10. Here is the latest evolution of my model, using relative ratios of monthly gold, silver & wage prices. https://docs.google.com/spreadsheets/d/12xiAkvM25aY0yNs6Z2gXBVDH8CFdI7lGf5sh8eZSXKg/edit?usp=sharing I have managed to get the model returning as much as x20 what a dumb buying strategy such "buy a fixed amount of a single metal" would have returned since 1968. The model is NOT for short term trading, but for purpose of long term accumulation of as many ounces as possible. To this end, I found it necessary to set the boundaries in wage/gold/wages ratios to some pretty high level - I found using a 70 month moving average, coupled with a price movement of >1.7 standard deviations worked best for a "buy only cheapest metal" signal, and a price movement >2.3 standard deviations away for a "swap" signal. So, in other words, the model can be expected to deliver a swap signal once every 4.2 years. Last signal was swap all silver for gold in March 2011, and before that swap all gold for silver in Oct 2008. Currently the GSR would have to move above 87.3 to generate another swap signal, however that is academic for me as I currently don't hold any gold.
  11. Van


    Some noticeable "legendary investors" have positioned themselves BIG in Gold: Drunkenmiller has 30% of his family's fund in GLD. http://www.fool.com/investing/general/2015/12/29/these-billionaires-are-betting-big-on-gold-in-2016.aspx
  12. Can we rename this the Stacker's Thread, then? Bought quite heavily today, though I think we may go a bit lower in the short term. Think that I am up to about 320oz. I have also been buying bits of silver flatware on ebay.. quite fun, actually. Have happily managed to persuade the wife to give put 5% of her income into buying, which is great as she is a pretty high earner.
  13. Van


    Gold definitely in a correction now. That it wasn't able to make a new high when yesterday's Brussels attack happened was clear sign of an intermediate top was behind us. I would now look for support around ~1190 high of last Oct, which is also where the 50dma is currently.
  14. Not so much MA crossovers, but rather prices moving away from the moving average, or a local min/max in the rate of change in prices. "Prices" being: Gold/Silver (tells you what to buy and occasionally swap) Precious metals/Wages (tell you how much to buy) Smoothed Portfolio Drawdown (tell you when to hedge) Very confident that my numbers add up, but currently condensing the spreadsheet to make everything more ordered is proving a bit of a nightmare. Will post the summary tables/charts when I've got it all pat. Meanwhile, interesting to note that the silver is now starting to outperform gold - GSR is down from 83 to 78 in the last few weeks. I will start buying gold if it starts trending below 74.
  15. Been refining my long term precious-metals investing model, bases on monthly gold, silver & wages and relative ratios. The model would have returned > 5,000,000 usd if you had just followed it's mechanically generated signals. One of the parameters It took a lot of thinking to devise was when to hedge the portfolio. In the end I used the rate of change in the portfolio's drawdown as the technical indicator. This resulted in a monthly success rate of barely 50% that the metals went down when the hedge was in place, but on average the down months were bigger than the up months, so the hedge was still effective. Interestingly, the model says that the portfolio should have been hedged every month from early 2012, and the hedge removed as of this month (March 2016).
  16. Listening to Polney or any of these rampers will absolutely be harmful to your wealth. They have large investments in their position and like anyone a strong emotional attachment to their theories. While I like the fundamental case for Precious metals I treat them as just an investment vehicle that I hope I can use to grow my wealth slowly in the years ahead. DYOR as always, ask why you buy, whether it is stocks, PMs, real estate and ask yourself where is the best place to put your money at the moment.
  17. Key points of my model: I assumed that the investor would strive to set aside 26% of their salary each month to buy PMs. Why 26%? Because, that is the amount that would need to be set aside for the average person to buy 0.75oz of gold per month on a historical basis., and it is a fairly realistic number that I believe should be achievable to most people. I could have gone for something lower like 1/2oz, but that would have made the rounding lumpier in the monthly calculations. Problem with gold is that it is difficult to buy fractionally without rounding issues coming into play. Gold has returned 7.74% annualized since 1968 Silver has returned 4.57% annualized since 1968 In the first scenario, I asked what would happen if you just bought a fixed weight of gold each month regardless of price? If I bought 0.75oz of gold without fail every single month then I would have laid out 26.2% of my income and be holding 434oz of gold with a total USD value if $545,000 today. There are also a few months where this amount of gold in USD is above an entire month's wages, making it very difficult to maintain such a strategy. Repeat this with silver, buying 35oz each month, and because silver has underperformed gold, I would be holding 29,235oz of silver with a USD value of $303,000. Not a great performance. A better strategy would be to buy a fixed dollar amount each month - this is known as cost-averaging, and in the long term is a mathematically proven way to lower your average cost and outperform the market by taking advantage of natural price movements to buy more when the market is cheap, and less when it is expensive. If I DCA 26% of monthly income into buying gold, I end up with 547oz of gold, worth $675,000. And likewise, if I DCA 26 of monthly income into buying silver then I end up with 29,235oz of silver worth $437k. Note that a DCA strategy outperforms a fixed-amount strategy by 26.24% for gold (675k vs 534k), and by a whopping 44.51% for silver (437k vs 303k). Silver is better able to take advantage of the DCA strategy by virtue of it's greater volatility. Nonetheless, even a DCA strategy in silver cannot match either strategy for the gold-only portfolio. Silver just can't keep up. My next scenario was to construct a model where you would buy gold and|or silver when the GSR moved away from it's historical mean. Playing with different ratios of gold:silver, and when to only buy gold, and when to only buy silver, I was surprisingly unable to make the model outperform the DCA-gold model. At best, it would only match it. This is simply because of gold's outperformance - you would have been best to just buy as much gold as possible at nearly all times, and the few times where you would be buying just silver are not enough to make hardly any difference. At best the model returned 3866oz of silver and 503oz of gold with a value of $677,000. Next model was similar to the one above, but added an extra upper/lower boundary where you would swap gold <-> silver and vice versa when the boundary was breached. I played a lot with the boundary levels, and at best the model returned 25762oz of silver and 268oz of gold with a value of $716,000. Phew. Now I took it one step further. Rather than use standard deviations away from the historical mean of the entire dataset, I calculated the boundaries using standard deviations away from the moving average of the GSR. This is represented in the Upper/Lower boundaries 1 & 2 in the chart - a bit like bollinger bands. This created far better signals for when to buy gold only, silver only, and when to swap one for the other. As you can see, swap signals are not a frequent occurence, happening only every few years. This model generated a big jump in returns - delivering 16059 oz of silver and 1882 oz of gold, with a total value of $2,563,000. Lastly, I wondered what would happen if I built in underweight/overweight amounts based on the price of Gold vs the average wage. In the dataset, an average year's wages as been enough to buy as much as 90oz of gold, or as little as 15oz. So I built a weighting model which indicated when to double your buying or to halve your buying based on the Wage/Gold ratio breaching moving a distance away from it's moving average. This is is shown by the 2nd axis which shows the periods when you should target buying more, and when it is prudent to scale back your buying. The overall contribution from average wages was still 26%. This is the final model and delivered further returns, resultin in 1880oz of silver and 2442oz of gold, with a total value of $3,016,000. ******* As mentioned, the beauty of this is that it all uses relative price of gold/silver & wages to determine how much of each to buy. No prediction is required to make use of it going forward.
  18. Here is my model in chart format: //explanation to follow..
  19. I have been doing a lot of data analysis and work on gold & silver prices since 1968. Firstly, a word about the Gold/Silver ratio (GSR), because I have changed my thinking on this and it's predictive power in the last few days. It is my opinion that the GSR will likely never drop to the levels we have seen in the past, below 20:1 like we saw in 1980 and back in the late 60s. Why? Because the GSR, least we forget, is simply a price. It is the price of a a fixed weight of gold as expressed in multiples of silver. And like all prices, in the long term it is determined by fundamentals, not by historical levels. We understand that the ratio of AAPL as priced in USD will likely never return to levels it was 20 years ago because of fundamentals, so it is with Gold as priced in Silver - while they share common characteristics, it is likely that one of them is better suited to the monetary requirement as a store of value, and therefore outperforms everything else over the long term. Good Money Appreciates. Hence, that is why we have seen the GSR move higher in more recent decades and hit 80 and higher at every few years as gold has outperformed silver by 7.7% vs 4.7% annualised since 1968. It is not likely that this is a fluke or it will means-revert. Rather, Gold outperforms because it is better suited as a store of value. Nike shares outperforms Reebok shares for the same reason. Gold should continue to outperform silver as a store of value in the very long term, and therefore we should expect to see new highs in the GSR in the future. Maybe not before it has moved back to fair value in the short term, but the fundamentals are working in its favour all the time. So, in conclusion, the historical mean of the GSR since 1968 is 54, but this is not very useful or meaningful just to look at the average price of the whole dataset. It is far better to use a moving average to determine current fair price, and the current price above/below that MA to gauge how cheap or expensive gold is in terms of silver. And the good news is that if you leverage that and put it into an investment/allocation model, you can make far better returns. I have devised and backtested various buy/allocation strategies for gold & silver, and the results are quite startling if you can identify the points where the price (GSR) moves past an extreme level from it's moving average. The beauty of is that it requires zero predictive power as it is all statistically driven. You simply buy gold & silver, or just gold or just silver, or occasionally swap gold for silver or silver for gold, all based on the level of the GSR from its moving average.
  20. Are most leveraged ETFs made up of options? I must admit that I generally avoid options like the plague, but I have been dabbling in the x2 and x3 leveraged ETFs that are available, especially as many of them are available to spreadbet at very tight spreads. Something like DUST is a sensible hedge if you are looking to protect some of your PM long positions, and unlike options it won't expire. It's down >80% since the miners exploded, and cannot go lower than zero.
  21. So whisper it quietly, but oil's doing rather well lately, isn't it? Gained $10 since this. Could have called the bottom to the very day. Now have the rather thorny problem of finding a re-entry point. Just completed a W bottom - all the momentum trading systems will be picking up on this.
  22. Been a very good few weeks. There are two factors that are driving me to front-loading my silver buying. First, there is potential for the Estonia VAT loophole to close by July this year. If so, this will raise premiums by as much as 50p/coin. And secondly, everything points towards us being at the start of a new bull market. So, by taking advantage of some 0% credit offers, I'm looking to really load up over the next 4 months or so, and have already accumulated far physical PM than I had originally planned by this stage. Bought a load of silver off a private seller - got it for £15.5 per oz, but that includes quite a lot of semi-numismatics which are worth a considerable premium. He was selling as he was buying as much GOLD as he could, impressed by the recent activity in gold. With the GSR at 83 on the day we did the sell, I bit his hands off. The trading account has returned some useful cash. I have now taken profits on most of my positions as I'm going on holiday next week and wish to enjoy it rather than worrying about my positions. Happy to let a few small positions run over this period. I believe that I'm slowly improving as a trader.. much more patient with my winners, and cutting my losses early. It may be that an approach that combines buying the physical while trading the paper is the combination that works "best" for me. CityIndex has recently introduced a new trailing-stop feature, which I really like and I believe has let me bag a bit more profit by catching moves, though I do have a tendency to set the stop too tight and get whipsawed out of good positions.
  23. Van


    $1275. Breaking out right now. I think we are going to be playing this one quite often in the next few years:
  24. Van


    PMs popping today. The bears are losing their grip.
  25. So here is a philosophical thought for the day: What is the cost of production for silver? Various estimates put it at anything between $9 - $25/oz. With spot price at $15, and bullion at $17, it's fair to say that you could be buying a silver coin for a few dollars more than it costs to mine (never mind hidden costs like exploration, licences etc which probably don't figure in some of the lower estimates), and even a chance that you are buying it for less than it's overall cost of production. How does that compare to say.. a $3 Starbucks coffee? How much R&D, sweat & effort went into cultivating a few coffee beans, milk & cream? I would wager less than 20 cents. Yet hundreds of millions of people will happily pay $3 for a coffee and wouldn't buy a silver coin for $17. Crazy world. http://www.forbes.com/sites/kitconews/2013/07/10/feature-is-it-sustainable-to-mine-silver-in-this-current-price-environment/#23e1fcc760ff